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Golding v Martin [2019] EWCA Civ 446

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29th October 2019

Summary

The Court of Appeal determined whether the existence of the right to relief from forfeiture amounts to a prospect of “success” at trial when considering an application under CPR r.39.3 to set aside a possession Order.

Facts

Ms Martin was a tenant of a flat in Sidcup pursuant to a long lease. She moved away to Spain and left the property in the hands of her brother. Service charge arrears accrued and the landlord obtained a determination from the FTT that the arrears were payable. The landlord went on to obtain a possession Order on the grounds of forfeiture, however although service charges were reserved as rent under the lease, the possession Order did not comply with the provisions of section 138 of the County Courts Act 1984, which provide for automatic relief from forfeiture if the rent arrears and costs of the action are paid within 28 days of the Order being made.

Issues

When Ms Martin found out about the possession Order, she made an application under CPR r.39.3 to set it aside. CPR r.39.3 requires the applicant to show that i) the application was made promptly; ii) there was a good reason for failing to attend the trial; and iii) she has a reasonable prospect of success at trial.

As regards her prospects of success, Ms Martin relied upon the fact that, though there was a determination against her that the service charge arrears were due, she nevertheless had a right to relief from forfeiture which would cause the lease to be reinstated.

First instance

The Deputy District Judge hearing the application held that Ms Martin did not have a reasonable prospect of success at trial as the existence of a right to relief from forfeiture was not a defence to a claim for possession.

Ms Martin appealed the first instance decision to HHJ Luba QC, who reversed the Judge’s finding, holding that as a successful claim for relief from forfeiture would mean that the tenancy would not be lost despite a possession Order having been made, the tenant would have achieved success.

The landlord appealed to the Court of Appeal.

Decision on appeal

Ms Martin sought by her Respondent’s notice to raise new points in the Court of Appeal relating to i) the validity of the possession order; ii) whether CPR 39.3 was the correct test for the court to apply; iii) whether the landlord had waived the right to forfeit the lease; and iv) whether the proceedings had been properly served.

As points i) and ii) were pure points of law, the Court of Appeal permitted Ms Martin to raise them on appeal, despite those matters not having been argued below.

The Court of Appeal agreed with Ms Martin that the possession Order itself was defective and therefore ought to be set aside as of right – e.g. without applying CPR r.39.3. This was because service charges were reserved as rent in the lease, but the court’s Order simply provided for possession to be given (without a date) and did not provide for automatic relief from forfeiture if the tenant paid the arrears and costs within 28 days of the order. The Order therefore did not comply with section 138 of the County Courts Act 1984. This was not a mere technicality – it was of the utmost importance that the tenant was given the opportunity to pay and to have the lease restored.

Accordingly, the Court of Appeal did not strictly need to consider the point about whether the existence of a right to relief from forfeiture was capable of amounting to a reasonable prospect of success under CPR r.39.3. Nevertheless, the point was an important one and therefore the Court of Appeal dealt with it. It held that the claim for relief from forfeiture was inextricably involved with the claim for possession and that the pre-CPR treatment of the existence of the right to relief applied equally to the post-CPR position. Therefore the tenant in this case was correct – the judge at first instance should have allowed her application.

The Court of Appeal therefore dismissed the appeal.

Comment

This case highlights the common pitfalls of failing to properly consider the terms of a forfeiture Order, especially where the claim is undefended.

All too often, the court is asked to make an immediate possession Order and proper consideration is not given to the provisions of section 138 of the County Courts Act 1984. As this decision shows, this will leave the Order liable to be set aside. This could have dire consequences – in this case the landlord had already disposed of the flat to new tenants.

Another important point to note is that, applying Forcelux v Binnie [2009] EWCA Civ 854, this was not strictly a CPR r.39.3 case as the first summary possession hearing at which the Order was made is not a “trial” for the purposes of the CPR. The Judge should have proceeded under CPR r.3.1(2)(m) and r.3.1(7), in respect of which CPR r.39.3 was only to be applied by analogy (LB Hackney v Findlay [2011] EWCA Civ 8.

There is a tension between the decisions in Forcelux and Hackney in that in Forcelux it was suggested that the court’s discretion to set aside a possession order under CPR 3.1 is wide and unfettered, whereas in Hackney it was held that the CPR 39.3 principles ought to be applied (although with less rigour) save for cases involving unusual or highly compelling factors.

The Court of Appeal attempted to resolve this tension by pointing out that this in case, as in Forcelux, the property was a high value capital asset rather than a tenancy at a rack rent (as in Hackney). In such a case, the court is entitled to take a broader view of what constitutes “success”.

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